Mr. Mark Learmonth reports

NAMA COPPER/COBALT EXPLORATION PROJECT, ZAMBIA: SUMMARY OF RESULTS OF THE 2011 EXPLORATION program AND OUTLINE OF THE 2012 EXPLORATION PROGRAMME

Caledonia Mining Corp. has provided the results summary of the 2011 exploration program at its Nama copper/cobalt project in Zambia and outlined the exploration program for 2012.

Highlights

The results from the 2011 drilling program demonstrate a new and very exciting aspect to the Nama copper/cobalt project.

• A new mineralized copper zone has been identified.
  • Estimated weighted average copper grade -- 0.47 per cent;
  • Estimated weighted average thickness -- 41 metres;
  • Intersected depths of between 280 metres and 450 metres.

• A sufficiently large, near-surface resource updip from the existing drill holes may provide the basis for a future open-pit mining operation.
• The 2012 exploration program will now commence as soon as possible and will include the following three phases of drilling:
  • Phase 1: A 2,400-metre drill program to explore for potential shallower updip continuation of the new mineralized zone to surface.
  • Phase 2: A 6,000-metre drill program to explore for potential deeper downdip continuation of the new mineralized zone.
  • Phase 3: A possible resource drilling program to quantify the shallower updip resources. This phase cannot be finalized at this stage as the scope of this program is entirely dependent on the evaluation of the phase 1 program results.

• The costs of these drilling programs will be fully financed from current cash resources.

Commenting on these exploration results, Stefan Hayden, Caledonia's chief executive officer and president, said: "The 2011 drilling program at Nama identified a new and very exciting aspect to Nama. What we have found differs markedly in mineralization style to other properties in the region in that the zone we have identified occurs in an atypical copper belt setting and occurs in rocks overlying the ore shale. This zone of mineralization occurs at relatively shallow depth relative to the depth of the ore shale in the area and possibly extends to surface. A sufficiently large, near-surface resource depth may therefore provide the basis for a future open-pit mining operation.

"The 2012 exploration program will commence as soon as the rains and ground condition allow during the second quarter. The results should allow us to confirm and further refine our model of Nama's geology and copper resources potential. Caledonia has sufficient cash to complete the 2012 exploration program and intends to manage its cash resources so that it can undertake further work at Nama without raising new equity."

Background to the Nama project

Caledonia holds four contiguous large-scale mining licences covering approximately 800 square kilometres on the Zambian copper belt. The northern boundary of Caledonia's licensed area is the DRC border and the eastern boundary abuts the licence area that is held by a joint venture between Vale and African Rainbow Minerals where a new copper mine is currently under construction.

Prior to the 2011 program, exploration activities had defined three main styles of mineralization in the Nama licence area:

1. A-type cobalt oxide mineralization;
2. D-type iron oxide bodies which are mostly enriched in cobalt;
3. Copper-dominated ore shale-hosted copper-cobalt mineralization, commonly observed elsewhere in the copper belt and which is being exploited by neighbouring mines to the east and south of the Nama licence areas.

The 2011 exploration program

The 2010 exploration program identified two resource targets at Nama (being Konkola East and Kafwira) which were characterized as belonging to the ore shale-hosted copper-cobalt-style of mineralization. The 2011 program was focused on Konkola East where a four-hole diamond drilling program was carried out with the primary objective of confirming the existence of ore shale member of the copper belt stratigraphy. The results of this program confirmed the existence of ore shale in all holes. The ore shale intersection in holes 1 and 2 was at depths and copper grades that do not merit further exploration at this stage. Evaluation of the drill core extracted from holes 3 and 4 identified a zone of mineralization which occurs at considerably shallower depths than the ore shale and does not occupy a specific stratigraphic layer as would be expected. Assays of the mineralized zones identified in holes 3 and 4 were sufficiently encouraging to warrant a fifth hole being drilled in late 2011 and which also intersected the newly identified mineralized zone.

Preliminary evaluation of the results of the 2011 drilling program

The new mineralized zone identified in holes 3, 4 and 5 is considered to be a contiguous zone. The assay results for the three intersections have a weighted average of 0.47 per cent copper over a weighted average width of 41 metres at depths of between 280 metres and 450 metres. Holes 3 and 4 are approximately 1,650 metres apart representing a minimum strike length of the mineralization. The interpreted structure of the mineralized zone suggests that the zone may extend to surface within the Nama licence.

Although the copper grades of the newly identified zone are lower than existing mines in the region, the zone is relatively shallow and the ore mineralogy appears particularly suited to low-cost metallurgical processing.

The 2012 exploration program

Caledonia's board has reviewed the results of the 2011 exploration program and the recommendations of management and has approved an exploration program for Nama in 2012 which has the following objectives:

• Phase 1: drilling of additional holes comprising approximately 2,400 metres with the objective of identifying a continuation of the newly discovered mineralized zone toward surface. This phase of the exploration program is expected to start as soon as ground/weather conditions permit and results for this work are expected four to five months thereafter.
• Phase 2: drilling of additional holes comprising approximately 6,000 metres with the objective of identifying the nature of a deeper continuation of the above mineralized zone. This work will take place after completion of phase 1 and is expected to take approximately eight to 10 months.
• Phase 3: Provided the results of the phase 1 program are positive, a drilling program focused on delineating and evaluating resources compliant with NI 43-101 will be presented to the Caledonia board for approval prior to possible commencement. This phase may commence during phase 2 activities.

Substantial additional exploration work may be required in future years to arrive at an NI 43-101-compliant resource statement.

Caledonia has sufficient cash resources to cover all of the exploration costs for 2012. Caledonia intends to manage its cash resources so that it retains the financial capacity to progress this project as far as possible without requiring third party involvement or equity financing.

Dr. Pearton, BSc, Eng (mining geology), PhD (geology), and fellow of the Geological Society of South Africa, is Caledonia's vice-president of exploration and a qualified person as defined by NI 43-101. Dr. Pearton consents to the inclusion in the release of the matters based on his information in the form and context in which it appears.

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